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How Much Does It Cost to Open Tim Horton’s Franchise?

Do you want to start a Tim Horton’s franchise and want to know the fees, agreement, details? If YES, here’s how much it cost to buy a Tim Horton’s franchise. Tim Hortons Inc. is a Canadian-based multinational fast food restaurant known for its exquisite coffee and doughnut offerings. It is also one of Canada’s largest quick service restaurant chain. As of December 31, 2016, it was recorded to have had a total of 4,613 restaurants in nine countries.

The company was founded by Tim Horton in 1964, after he had tried his hands in the hamburger restaurants business. Horton partnered with investor Ron Joyce, who assumed control over operations after Horton died in 1974. Joyce expanded the chain into a multimillion-dollar franchise.

Tim Hortons agreed to a sale in 2014 to Burger King who purchased it for US$11.4 billion, and the chain became a subsidiary of the Oakville-based holding company Restaurant Brands International on December 15, 2014, which is majority-owned by Brazilian investment firm 3G Capital.

Buying a Tim Horton’s Franchise and How Much It Cost

Details to Note When Intending to Acquire a Tim Horton’s Franchise

  • Restaurant Types

Tim Hortons grants its franchisees the right to open one of the following three types of retail stores:

a. Standard Shop: This is the typical Tim Hortons restaurant that can be seen in most locations. It produces, merchandises, and sells a variety of baked goods such as donuts, cookies, muffins, tarts, as well as coffee and other beverages. Most Standard Shops also offer a variety of soups, chili, and sandwiches

The Standard Shop generally ranges in size from 1,000 to 2,300 square feet, and contains a seating area for customers. The Standard Shop also typically includes a drive-thru facility and may be a stand-alone or an in-line Shop.

b. Non-Standard/Kiosk: This king of store can be installed in almost any type of location or area. The non-Standard/Kiosk comes in two forms namely;

  • a built-in kiosk
  •  a full service cart

The kiosks are usually found within another facility or institution such as retail stores, universities, gas stations, hospitals or airports. The built-in kiosk is designed to accommodate any product format but is best suited for a full menu line, including coffee, baked goods, soups, sandwiches, and chili.

The dimensions of a built-in kiosk vary depending on the proposed location. The full service cart is modular and can be modified to suit the size, location and consumer demand of its location.

It can accommodate one or more coffee stations and/or a limited menu. In certain limited circumstances, kiosk owners may be required to supply kiosks with all necessary products or make arrangements to obtain their goods from a local franchisee.

  • Territory Offered

Franchisees are usually not given an exclusive territory. Franchisees may face competition from other franchisees, from outlets that the franchisor owns, or from other channels of distribution or competitive brands that it controls.

The franchisor or any affiliate may establish, and/or otherwise license others to establish, at any location other than the Shop’s premises, regardless of its geographic proximity to or impact on the Shop, other outlets under the same or different Tim Hortons Trademark.

Financial Assistance to Tim Horton’s Franchisees

In a situation where franchisees lease/sublease their Shop premises location from the franchisor or an affiliate, the terms of the lease or sublease will be site-specific. If the franchisor constructs the leasehold improvements and installs all necessary fixtures, furnishings, signs, and equipment, the rent may reflect the cost of leasehold improvements.

Except as described, neither the franchisor nor any affiliate offers financing or arranges for financing from other sources. The franchisor does not guarantee a franchisee’s notes, leases, or obligations to third parties.

Tim Horton’s Franchisee Training

As part of the criteria to acquire a Tim Hortons franchise, franchises are required to attend and satisfactorily complete the initial training program before they may open their Shop. Though this is compulsory, but the franchisor may waive this training for certain franchisees based upon their individual circumstances and experience level.

Tim Hortons provides a 7 week initial training program during which franchisees are taught all facets of the operation of their restaurant. This training program is typically held at their Training Center in Oakville, Ontario, Canada. In addition, they also provide an in-store training program in the United States, which typically runs about 10 days after completion of the initial training program.

Franchises must also must attend and complete additional training programs as required by the franchisor at the time(s) and location(s) selected by the franchisor.

Obligations and Restrictions of Tim Horton’s Franchisees

Franchisees are required to perform their duties faithfully, honestly, and diligently, and must devote all their working time, labor, skill, and best efforts to operating their Shop. Franchisees are required to live no farther than 30 miles from the Shop.

Franchisees cannot delegate this responsibility except in very special circumstances and subject to the franchisor’s prior approval. Franchisees must also designate a “managing owner” who must have the authority to bind franchisees in their dealings with the franchisor and its affiliates and who can direct any action necessary for their compliance with the Franchise Agreement or any other agreements relating to their Shop.

Again, Franchisees are only allowed to sell the products and services the franchisor requires in the franchise manual or may otherwise specify in writing as being part of the Tim Hortons System. Franchisees are not permitted to sell any product or service that the franchisor has not authorized in writing.

Term of Agreement and Tim Horton’s Franchise Renewal

All Tim Hortons shops have an initial term that begins when the Franchise Agreement is signed by franchisees and the franchisor, and it expires after 20 years. This does not include Non-Standard Shops/Kiosks as their terms can vary depending upon the circumstances but are generally 5-10 years based upon the location of the Non-Standard Shop/Kiosk, menu offering, existence of a drive thru, non-exclusive seating, and other factors. Renewal or extension of the term is not allowed.

Financial Requirements for a Tim Horton’s Franchise

  • Initial Franchise Fee – $15,000 to $50,000
  • Net worth – $1.5million
  • Liquid assets – $500,000
  • Real Estate Taxes, Personal Property Taxes and Common Area Maintenance Charges – $1,000 to $22,000
  • Equipment – $200,000 to $400,000
  • Royalty – 4.5% to 6% of Gross Sales or more under limited circumstances
  • Advertising Contributions – 4% of Gross Sales.
  • Planning and Development and Design Costs – $20,000 to $80,000
  • Site Development Costs – $100,000 -to $400,000
  • Building Costs – $250,000 to $800,000
  • Training – $7,900 to $11,800
  • Start-up Supplies and Initial Inventory – $15,000 to $30,000
  • Professional and License Fees – $1,500 to $10,000
  • Development Assistance Fees – $5,000 to $25,000
  • Insurance – $2,500 to $21,500
  • Initial Advertising and Promotion – $3,000 to $6,000
  • Security Deposits – $0 to $10,000
  • Additional Funds – $25,000 to $40,000
  • Transfer Fee – 5% of the full purchase price
  • Smart Store charges – $200 to $700
  • Total Investment – $423,700 to $800,506

Veteran Incentive

For a standard Tim Hortons restaurants, a VetFran Participant pays no initial franchise fee (currently, $35,000) for his/her first Restaurant and monthly royalty payments are reduced by 2.5% for the first 12 months of operation; For VetFran Participants franchising under an Tim Hortons Operator Agreement, a VetFran Participant pays no security deposit for his/her first Restaurant and the monthly operator fee is reduced by 2.5% for the first 12 months of operation.

6 Steps to Acquire a Tim Horton’s Franchise

There are six (6) steps to becoming a Tim Hortons® Franchisee, and they include:

  1. Candidate Inquiry

The first step towards becoming a Tim Hortons franchisee is the candidate inquiry. The intended candidate, if he or she has decided to franchise with the brand must first of all complete the Pre-Qualification Questionnaire. After completing the questionnaire and expressing his or her intent, the candidate would receive an automated email prompting them to “opt-in” to receive future communications from Tim Hortons.

It should be noted that for a candidate to express the intention of franchising with Tim Hortns, he or she must have unencumbered funds of about $100,000 and a net worth of $500,000.

  1. Discovery Call and Background Screening

Once Pre-Qualification Questionnaire is complete and if the candidate meets initial requirements, the franchising team will contact the candidate for what is known as a Discovery call. After the call, the candidate will be invited to complete credit and criminal checks, send in an Asset Verification letter and sign a Non-Disclosure Agreement (NDA). All these would be further used to ascertain the candidate’s eligibility.

  1. Operations Interviews

Once the candidate has scaled the above hurdle, he or she would be required to attend two or more interviews that are scheduled with Operations Representatives. After this, they would have to prepare and complete a business case presentation.

  1. Restaurant Experience Days

To get the candidate familiarized with the workings of the Tim Hortons brand, he or she would be required to participate in 2 experience days at a Tim Hortons® restaurant. Registration fee is usually required for this and it would be borne by the candidate.

  1. Senior Leadership Team Interview

Moving forward, the candidate would be scheduled to meet with a member of the Senior Leadership (Head of Operations or President of Tim Hortons® Canada) to have an interview with him or her.

  1. Final Approval and Training

Candidates who complete all steps successfully, will be considered for future franchising opportunities and they would proceed for the mandatory business training of 7 weeks.

A Brief Overview of Tim Horton’s Franchise

Industry Overview

  • Founded: May 17, 1964
  • Founders: Tim Horton, Jeffrey Ritumalta Horton and Ron Joyce
  • Franchising Since: 1984

The Tim Hortons restaurant opened officially on May 17, 1964, in Hamilton, Ontario. It was founded by G. “Tim” Horton, who thought it wise to use his name to open his restaurant without realizing then that he was immortalizing the name. The Tim Horton name meant quite a lot back then because Tim, the founder had played in the National Hockey League from 1949 until his death in a traffic collision in 1974.

In 2014, Tim Hortons Inc. was officially acquired by Burger King in a deal totaling CDN$12.5 billion (US$11.4 billion). As part of the plan, 3G Capital acquired the company at $65.50 per-share with existing shareholders receiving $65.50 in cash and 0.8025 shares in the new holding company.

A Tim Hortons representative stated that the proposed merger would allow Tim Hortons to leverage Burger King’s resources for international growth; the two chains would retain separate operations post-merger.

In 2013, Tim Hortons’ revenue reached 3.07 billion U.S. dollars, making it the second largest coffee chain in the world after the global giant, Starbucks. Starbucks dwarfed the Canadian coffee chain with revenues just short of 15 billion dollars and 19,767 worldwide locations, compared to Tim Hortons’ 4,740.

Nevertheless, in its home country, Tim Hortons was placed at an impressive number five on a list of Canada’s most valuable brands in 2014. In 2017, Tim Hortons annual revenue was pegged 3.15 billion U.S. dollars.